There will probably be an above average fall in storage levels that should lift prices above $5 but will have a hard time increasing them toward $6+ unless the Arctic air remains beyond the  upcoming week. The other big factor that could allow natural gas prices to increase above $6 again is a reduction in drilling that lowers production to match the lower demand. The EIA currently predicts a ~.7% increase in production so producers will probably have to delay a few expansion plans to prevent prices from remaining below $5.50.

Oil prices can also be affected by demand for heating oil, especially in its demand center of the Northeast. There will probably be a couple of significant draws from distillate and propane stocks over the next two weeks that bring them back to average levels. I suspect oil prices will remain mostly flat until reports of complete OPEC compliance and further potential cuts materialize.

Bottom line: The cold snap will probably prevent prices from falling much further from today’s low levels. But a rise above $6 for natural gas or $45 for oil would probably require a long cold snap and/or further OPEC action amidst current recessionary low demand. An exciting result is that natural gas is low enough to compete with and replace coal in some markets, lowering our greenhouse gases even further than current trends.

I’ll be in touch sporadically during the inauguration festivities these next few days. I’ll be shuttling people around DC in our Greenway rickshaws/pedicabs and will report on the scene shortly